Holiday Donations and Tax Savings

Tax Deductions and Credits

Every year around this time, we start thinking about what we plan to do in terms of charitable contributions. There are a few organizations we like to support with cash and a few we like to support with time.

Regardless of how you decide to give, it’s important to do it the right way so you can save as much as possible on taxes. If the government is willing give you a tax break as you’re helping others, it makes no sense not to take advantage of it, right?

Also, as the holiday season approaches, you are going to be seeing an increase in solicitations for charitable donations. Do it right, keep track of your holiday donations, and you can get some of it back in the form of tax deductions.

It’s also important to note that you can only claim charitable contributions if you claim itemized deductions. If you usually get the standard tax deduction, you may be able to increase your tax deductions by donating so you can itemize and get the larger tax deduction.   You don’t need to know the difference between standard tax deductions and itemized tax deductions.  TurboTax figures out your deductions for you.

Save Your Receipts

If you make a donation and want a tax deduction, you are required to retain a record of that donation.   It’s important to realize that acceptable records are those that are “official.”  This means a bank record (such as a cancelled check, or the charity’s name for a debit or credit donation on the bank statement) or a receipt from the charity itself.

Keeping track of all the money you put into the buckets for those guys in Santa suits isn’t going to cut it. You need an actual receipt or bank record if you want the tax deduction.

Donate Goods

You can also donate goods around the holidays. Donations to thrift stores and to charities that qualify as tax-exempt can be a great source of tax deductions. If you have your kids donate some of their toys just before the holidays (and the advent of new toys), you can deduct the fair market value on your taxes.

Be aware that for donations over a certain amount, you might need to attach extra paperwork, including sharing the amount you originally paid for the items. Understand that you don’t receive a tax deduction for the amount you paid for goods; you only receive a deduction for the current market value. Also, the items must be in good, usable condition.  TurboTax ItsDeductible will calculate the fair market value of your donations.

When you donate the goods, don’t forget to ask for a receipt. Even when donating goods, you need a receipt from the charitable organization.

Track Your Mileage

If you volunteer your services for a charity this holiday season, you might be able to track the mileage driven in your efforts to help. You can’t receive a deduction for the value of the time you spend working for the charity, but you can get a deduction for the miles you drive.

If you are driving your car in an effort to benefit a charity, make sure that you keep track of the mileage, and then deduct it later. When using your own car, you can deduct 14 cents per mile.  This can be one way to reduce your tax liability while doing good works.

Holiday donations can be a great way to help those in need this time of year and you can also get a tax benefit. You might as well get a financial benefit, even as you help others.

Comments (72) Leave your comment

  1. A another company bought out tastykake baking company in 2013. They were willing to give us 4.00 per share. I was unable to find my purchase form from my broker on the amount that I paid for the stock. I believed it to be around 25.00 per share. Am I able to take a deduction for selling the stock since I don’t have the original purchase form. By the way the broker has sinced past away and no one else is able to help me.

  2. Big thanks for this. As a newer small business (u/5yrs), I am still a tad punch drunk with the tax rules and restrictions . Thank you for all the posts. A small investment in Turbo Tax has paid big dividends. Marcus Mann

  3. My wife is active duty Navy, she is on orders to go to school to become a midwife. She is currently living in another area and renting a house there. As this is her duty assignment and she is required to do research and such, is the office area where she does her studying and research in considered a home office? She does not got to any office, this is her full time job.

  4. My husband & I want to donate 3000.00 to needy families for the holiday season & want to know what kind of tax break would we get itemizing on our tax return? Is it a percentage of the donation on the income or do you take that amount off of the gross income?

  5. We buy Christmas gifts for 9 children at a Tijuana orphanage every year. I save the receipts of what we purchased, including Christmas stockings and candy stocking stuffers. Is this receipt sufficient record of the donation? The orphanage doesn’t issue a receipt for donations to the children

  6. I donated my car to the Susan G Komen Cancer
    What form do I need to include when filing my taxes? I have a receipt from the organization and I know I also need to submit that but what other form? Can I still use turbo tax?

    1. I think so. I donated a car a few years ago and used turbo tax. It don’t care whether it’s a coat or car but you may have to come up with a fair price on your own. edmonds, nada, etc

  7. During the last secveral years, I have been owing money. My question is If I donate a $1000.00 Will I get 100% of that credited on my return?

    1. My question is If I donate a $1000.00 Will I get 100% of that credited on my return? No. If you take the standard deduction it will do you no good. If you are itemizing deduction use your incremental tax rate to find out how it benefits you. i.e. if the last dollar you earn is taxed at the 20%; the $1000 donation reduces by $200.

    2. It depends if you can itemize and even then you only reduce your taxable income by 1000 if you donated 1000. If you’re in a 20% tax bracket it would save you 200 dollars.

  8. I sometimes help (give money to) a friend who is blind and deaf. I understand that this money is not deductible, but wonder if a tax deductible fund could be set up that I could contribute to that would benefit only him.

  9. I was going to donate my late wife’s clothes, but before I could do so I had a flood in my house and the reclamation people threw them out. My insurance would not cover it, but gave me a list of what was thrown out. Can I take a deduction as a casualty?

  10. I am the lay minister for our little church. I do not receive a salary for this, but I am essentially full time. We live apx 8 miles from the church. What can I deduct for this job? Office space, mileage, ??? Also put in a geo-thermal heating system and understand that there is a 30% TAX credit for the unit and installation. Does that include Electrical updates to the home to accomodate the installation?

    1. You did not give them to charity No charitable deduction. You may qualify for a casualty loss.
      Why did not the insurance cover the loss??

      1. I am not sure, but I think it was because my wife was deceased and the clothes had no value except to be given away for charity. They did not pay to have the clothes cleaned after the flood and the reclaim people did not store them while the house was being rebuilt. They told me they threw the clothes away. I am heartbroken over this as the clothes could have had further use by someone who desperately needs them.

  11. I have purchased several items for a local Girl Scout troop. The items are from a grocery store and a craft store. I just have the receipt from the stores. Can I write these off as a charitable donation?

      1. Mary Ellen, I have a questions in regards to cashing in U.S. Savings Bonds to pay for College costs for one of our children. I have been told that any earned interest is not taxed if used for this purpose. I do my own taxes with your company, where would I show the monies earned paid for college tuition?

  12. If you wish to deduct something, find the item in an official IRS publication, then either xerox the page or tear it out and put it with your tax return for future use.

    1. Susan,
      Yes, you can deduct 14 cents per mile or the actual cost of gas and oil plus tolls and parking fees you pay when donating time to charities.

  13. My custom is to satisfy the federal tax on an IRA distribution by having the investment company withhold a percentage from the distribution. If I establish a small scholarship at my old college and send the entire distribution directly to the college do I need to have anything withheld for the IRS? The scholarship would be a charitable distribution in my tax return. Also, could such a direct charitable donation be counted against my IRA’s required minimum distribution for the year?

    1. Hi Paul,
      Your distribution will be included on your form 1099R for the year, and will count toward your RMD.
      If you are donating the entire distribution, and normally itemize deduction (so this would be an increase in your total deductions), your taxable income would not increase and you would not need to have taxes withheld. If you normally take the standard deduction, you should have the taxes withheld because you will not see a deduction for the entire amount of the donation.
      Mary Ellen

    2. Depending on whether your scholarship fund is a single event and other facts, circumstances and goals, there may be several options for tax advantages. You would need to talk with a tax advisor familiar with trusts and estate planning.

  14. I have run several 5k races this year where it was for a local charity. The food & shirts that were provided were donated by a sponsor also at the race location, i.e. Panera Bread, or an athletic shoe store. Would the fees of $20 – $35 per race be deductible as I have their 501c 3 charity status and their contact info?

  15. I donated a time-share vacation to a charity. The fair market value is about $1400, what I pay per year (since it’s paid off) is $750. How do I deduct this?

    1. I actually called the IRS helpline on this. After a string of confused replies I was told this is “a gift of a right to use property” and is therefore NOT deductible.

      1. Sandra,
        My response was for giving the title for the time share to the charity, not just the use of the timeshare for the year. You were given correct information if you donated this year’s time.
        Mary Ellen

    2. Hi Sandra,
      You will use form 8283 to record information about your contribution. The instructions for the form tell you the information that must be attached to your tax return.
      Mary Ellen

  16. I just recently got a job. I have been receiving unemployment benefit up until September 2013. My spouse is not employed and my daughter is a student. Was it right for me to claim 3 dependents on my W2 for the new job?

    1. Yes you are considered the bread winner and your working supporting yourself and two others so yes you can claim three on your w-2s so they don’t take too much taxes out of your checks.

    2. yes but more correct for this next 45 days to take 10 or more deductions – you need the money and will owe no tax for this year. 3 would be correct for next years W2.

    1. Huyen,
      You cannot combine two years of expenses on your tax return, unless you pay them in the same year. If you incurred expenses in 2012 and didn’t pay them until 2013, you can deduct them in 2013. If you paid them in 2012, even if by credit card, you would deduct them in 2012.
      Mary Ellen

    1. Bernadette,
      No, the payment of your daughter’s loan is a gift to her, or a loan, and is not deductible.
      Mary Ellen

    1. You can deduct state income tax or sales tax but you can not do both. If you decide to take sales tax you can use the IRS calculator or the actual amount you paid. If you use the IRS formula which is based on all your income including tax free income you don’t need proof of sales tax paid. OR you can use the actual sales tax paid but you should have receipts or other documentation.

    2. If they are non-profit tax exempt 501(c)(3) you can. The ones I donate to with that status always provide me with a record of giving in January.

  17. In Michigan, our Governor eliminated deductions for charitable contributions along with eliminating other long-standing deductions. This has inflicted some hardship on non-profit charitable organizations.

  18. My wife & I are getting divorced, but in our divorce decree its states that I will be entitled to all monies paid into IRS as estimated payments,
    so we will be filing separately what are we to do?

    Allan Szamrej

  19. Is there a limit on contributions? I thought one could donate without a receipt for some amount under a certain limit. It sounds like receipts are needed for all contributions.

    1. Gloria,
      All the rules for determining whether Social Security is taxable will apply. If your income including 50% of your total Social Security exceeds $25,000 if you are single, or $32,000 if married, then you may have to pay taxes on some of the social security you received.
      Mary Ellen

    1. I have dropped several boxes of used clothing at the Goodwill drop-off location. How can I get a receipt to claim that.

    2. Great question , seems the box owner NOT THE LOCATION OF THE BOX’s owner is actually often times paying the owner of the location a cut of his action . Many seem to be for profit / up cycle operations simply reselling the boxes’ content – what is going on ? Shouldn’t churches be allowed to issue receipts for donated things as for example is done at Salvation Army?
      SA gets lots but not all of mine. Maybe they should get all of it.

  20. Thank you for the insight. I have been taking cloths to the Goodwill and Salvation Army throught out the 2013 year. Usually I pay about $1800.00 or more each year in taxes. I do this because I need the tax money through out the year. I would like to wean myself off doing this,..but I’m not sure how to do this? Would you have any informaton regarding how many to claim and still get some money back from the fed government, or just break even.

  21. Last year I could not deduct all the clothes that I gave to Charity. I tried to get help from the web site but I could not. So I let it go. I am not sure if I am going to use you this year, I do not need the deluxe form only the simple one and I keep getting charged for the deluxe version. Why is so hard to communicate with Turbo Tax? Also what is the limit for medical, I could not find that one out either?

    1. Hi Janet,
      I’m sorry you had difficulty when you entered your donations. I encourage you to use TurboTax again and contact a tax expert if you have a tax questions or customer support.

      Regarding medical expenses, you can deduct your expenses if they exceed 10% of your adjusted gross income(7.5% if you are over 65). So if your adjusted gross income is $50,000, then your expenses have to be more than $5,000.

      Thank you,
      Lisa Greene-Lewis

      1. Hi Lisa,
        How much % of income have to be in donation to at least break in even if not get some money back?
        Thank you,

      2. Why did you not tell the young lady why it is so hard to get Turbo Tax on the phone?

        And, there is no limit to medical expenses that you can document, only a minimum before they can be deducted.

        Also, WHERE IS the 2013 TurboTax software?

      3. Hi John,
        I’m not sure what problems she had getting someone on the phone, but our agents are here year round. If she called during peak season there may have been a lot of people calling our agents.

        Regarding medical expenses, you are correct that there is no limit to medical expenses, but there is a minimum that can be deducted which are the expenses over 10% of your adjusted gross income(7.5% for 65 and over).

        TurboTax 2013 for desk top is released. TurboTax online will be available early December.

        Thank you,
        Lisa Greene-Lewis

    2. Claim 1 but if you are married make sure your spouse is not claiming too many deductions.
      If you want to wean your self off of the extra cash from the taxes try to do the Dave Ramsey Financial Peace program It actually works and is simple with no investing needed.

      1. Not sure if this reply was for me. I was asking about the form and how to claim my clothes that I donate. I asked for help when doing my taxes and I got none.

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